Analysts in the securities industry said the KOSDAQ index's break above 1,000 points was thanks to net buying of exchange-traded funds (ETFs) by individual investors. In particular, for KOSDAQ leveraged ETFs, flows appeared to translate into buying in both the futures and cash markets.

A closing price is displayed on the dealing room board at the Hana Bank headquarters in Jung-gu, Seoul, on the afternoon of the 10th as the KOSPI edges up. The KOSPI closes at 5,301.69, up 3.65 points (0.07%) from the previous trading day, while the KOSDAQ ends at 1,115.20, down 12.35 points (1.10%). In the Seoul foreign exchange market, the won–dollar rate finishes weekly trading at 1,459.1 won, down 1.2 won from the previous trading day (1,460.3). /Courtesy of News1

On the 26th of last month, the KOSDAQ index broke above 1,000 points. Shinhan Investment & Securities analyzed that, when adding up major KOSDAQ ETFs, individual buying topped 1 trillion won in a single day. It added that from that day, the daily total topped 1 trillion won for six straight sessions, with a cumulative 6 trillion won flowing into KOSDAQ ETFs in a week.

During the same period, KOSDAQ market capitalization increased by 57 trillion won, from 580 trillion won to 637 trillion won. With the booming market, the daily notional of KOSDAQ150 futures also surged from 1 trillion won at the start of the year to 10 trillion won as of the end of January.

Park U-yeol, a researcher at Shinhan Investment & Securities, said, "The sharp rise in KOSDAQ futures notional and the KOSDAQ index is not unrelated to the ascent of KOSDAQ leveraged ETFs," adding, "When individuals buy KOSDAQ ETFs, the liquidity provider purchases cash equities to supply additional ETF units, and this amount is recorded as buying by financial investment."

In particular, KOSDAQ leveraged ETFs, whose trading volume is soaring, include KOSDAQ futures to replicate 2x returns, so ETF flows are said to lead to buying in both the cash and futures markets.

Generally, index band estimates are expressed as the product of earnings and the discount rate, but it was also noted that the recent KOSDAQ upswing was driven more by ETF flow effects.

Park said, "For KOSPI, no sector saw monthly inflows of 1% or more relative to market capitalization, but for KOSDAQ, 11 trillion won, equivalent to 2% of its 591 trillion won market capitalization, was a net inflow from financial investment."

In particular, health care, which accounts for 31% of KOSDAQ market capitalization, ranked near the top in inflow intensity. Park added, "Over one month, more than 3 trillion won was recorded as net inflows from financial investment, making it the No. 1 sector by net inflows."

Stocks with large net purchases by financial investment relative to market capitalization were also concentrated on KOSDAQ. In particular, five stocks—Wonik IPS, LEENO Industrial, HPSP, Dongjin Semichem, and EO Technics—showed strong flow correlations.

Park explained, "Even though financial time series are structurally unlikely to be statistically aligned, the one-year correlation of net buying by financial investment for HPSP and LEENO Industrial was a whopping 97%." Park analyzed that this suggests ETF basket trading targeting KOSDAQ IT companies is exerting strong influence.

※ This article has been translated by AI. Share your feedback here.